CONVERTIBLE NOTES PAYABLE | 9 Months Ended |
31-May-14 |
Debt Disclosure [Abstract] | ' |
CONVERTIBLE NOTES PAYABLE | ' |
On October 12, 2012, the Company executed a promissory note with Argent Offset, LLC for $20,000. The note bears interest at 18% and was due on or before January 10, 2013. On February 27, 2013, a new convertible promissory note was executed for $33,850. The note bears interest at 18% compounded monthly and is due August 26, 2013. The new note amends and replaces in its entirety the note dated October 12, 2012. Pursuant to the terms of the note, it is convertible into shares of the Company’s common stock at the option of the holder at any time in whole or in part at a conversion rate of $0.11. On the commitment date, management evaluated the conversion feature with respect to the benefit of the holder and determined the value of the conversion feature to be $18,464. This amount has been recorded as a discount against the outstanding balance of the note. The discount was amortized to interest expense over the life of the debt using the effective interest method. Interest charged to operations relating to the amortization of the debt discount for the year ended August 31, 2013 amounted to $18,464. In addition, the note included one warrant giving the holder the right to purchase 50,000 shares of common stock at a price of $0.20 per share for a period of three years. As required by ASC 470-20 the Company valued the warrant and recorded a debt discount to additional paid in capital in the amount of $3,690 based on the discount to market available at the time of issuance. The discount was to be amortized over the life of the loan to interest expense. As of August 31, 2013, $3,690 has been amortized to interest expense. On November 26, 2013, an agreement of temporary forbearance was executed in which for a $1,000 fee the lender agreed to waive any default until December 15, 2013. On January 10, 2014, another agreement of temporary forbearance was executed in which for a $500 fee the lender agreed to waive any default until March 20, 2014. On February 4, 2014, $2,500 was repaid on the note and on February 20, 2014, $20,000 of the principal was converted into 2,857,143 shares of common stock at $.007 per share which resulted in a loss on conversion of debt of $18,571. On March 10, 2014 the remaining principal and interest totaling $21,923 was converted into 3,131,792 shares of common stock at $.0632 per share which resulted in a loss on conversion of debt of $176,006. |
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On December 3, 2012, the Company executed a convertible promissory note with Steven J. Caspi (“Caspi”) for $125,000. The note bears interest at 5% and was due on or before November 30, 2013. Pursuant to the terms of the note, it is convertible into shares of the Company’s common stock at the option of the holder at any time in whole or in part at a conversion rate of $1.25. On the commitment date, management evaluated the conversion feature with respect to the benefit of the holder and determined the value of the conversion feature to be $60,000. This amount has been recorded as a discount against the outstanding balance of the note. The discount is being amortized to interest expense over the life of the debt using the effective interest method. The note also issued one warrant giving the holder the right to purchase 15,625 shares of common stock at a price of $2.00 per share for a period of five years. As required by ASC 470-20 the Company recorded a debt discount to additional paid in capital in the amount of $16,455 based on the discount to market available at the time of issuance. The discount has been fully amortized to interest expense. On March 10, 2014, the Company executed a forbearance agreement with the lender modifying the terms of the original agreement. Per the new agreement the conversion price was changed to $0.005 per share and the due date was extended to November 30, 2014. As a result to the new conversion price the Company recorded an additional debt discount of $48,539. The additional discount will be amortized over the remaining term of the note. On March 21, 2014, $25,000 of the note was converted into 5,000,000 shares of common stock. The note is shown net of a debt discount of $23,228 and the note has accrued interest of $9,411. |
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On March 20, 2013, the Company executed a convertible promissory note for $32,500 with Asher Enterprises, Inc. The note bears interest at 8% per annum and is due on or before December 26, 2013. The note is convertible at a 49% discount any time during the period beginning 180 days following the date of the note. The Company recorded a debt discount in the amount of $32,500 in connection with the initial valuation of the beneficial conversion feature of the note to be amortized utilizing the effective interest method of accretion over the term of the note. Further, the Company recognized an initial derivative liability of $49,939 based on the Black Scholes Merton pricing model. During the nine months ended May 31, 2014, the total principal of $32,500 and accrued interest of $1,300 was converted into 6,143,590 shares of common stock. As a result of the conversion $8,125 of the remaining debt discount was expensed and the company recognized a gain on derivative liability of $35,600. |
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On April 4, 2013, the Company executed a convertible promissory note for $15,500 with Asher Enterprises, Inc. The note bears interest at 8% per annum and is due on or before January 8, 2014. The note is convertible at a 49% discount any time during the period beginning 180 days following the date of the note. The Company recorded a debt discount in the amount of $15,500 in connection with the initial valuation of the beneficial conversion feature of the note to be amortized utilizing the interest method of accretion over the term of the note. Further, the Company recognized an initial derivative liability of $21,610 based on the Black Scholes Merton pricing model. During the nine months ended May 31, 2014, the total principal of $15,500 and accrued interest of $620 was converted into 3,526,087 shares of common stock. As a result of the conversion $6,045 of the remaining debt discount was expensed and the Company recognized a gain on derivative liability of $17,286. |
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On June 3, 2013, the Company executed a convertible promissory note for $32,500 with Asher Enterprises, Inc. The note bears interest at 8% per annum and is due on or before March 5, 2014. The note is convertible at a 49% discount any time during the period beginning 180 days following the date of the note. Company recorded a debt discount in the amount of $32,500 in connection with the initial valuation of the beneficial conversion feature of the note to be amortized utilizing the interest method of accretion over the term of the note. Further, the Company recognized an initial derivative liability of $34,945 based on the Black Scholes Merton pricing model. On February 25, 2014, principal of $14,200 was converted into 3,086,957 shares of common stock. During the nine months ended May 31, 2014, the total principal of $32,500 and accrued interest of $1,300 was converted into 7,347,826 shares of common stock. As a result of the conversion $2,865 of the remaining debt discount was expensed and the Company recognized a gain on derivative liability of $78,028. |
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On June 19, 2013, the Company executed a Convertible Promissory Note (the “note”) with JMJ Financial (“JMJ”). The nominal principal sum of the Note is $300,000, with an original issue discount of ten percent (10%). The note matures one year from the effective date of each payment, which is made at the sole discretion of JMJ. The Note is convertible into common stock in whole or in part at a variable conversion price equal to a 40% discount to the lowest trade price in the twenty five trading days prior to conversion. |
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The Company received its first payment from JMJ towards the loan of $55,000 on June 19, 2013. The Company recorded a debt discount in the amount of $60,500 (payment plus 10% original discount) in connection with the initial valuation of the beneficial conversion feature of the note to be amortized utilizing the effective interest method of accretion over the term of the note. Further, the Company recognized a derivative liability of $75,507 based on the Black Scholes Merton pricing model using the following attributes: .13% risk free rate, 134% volatility and a one year term to maturity. During the nine months ended May 31, 2014, principal of $11,351 and accrued interest of $7,944 was converted into 4,200,000 shares of common stock. As a result of the conversion $3,452 of the debt discount was accelerated and expensed. On March 19, 2014; the remaining principal of $20,900 was converted into 3,800,000 shares of common stock. As a result of the conversion the remaining $14,614 of debt discount was expensed to interest expense and the Company recognized a gain on derivative liability of $241,878. |
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On August 5, 2013, the Company executed a convertible promissory note for $32,500 with Asher Enterprises, Inc. The note bears interest at 8% per annum and is due on or before May 7, 2014. The note is convertible at a 49% discount any time during the period beginning 180 days following the date of the note. During March 2014 the principal of $32,500 and $1,300 of accrued interest was converted into 6,830,508 shares of common stock. As a result of the conversion the remaining $23,400 of debt discount was expensed to interest expense and the Company recognized a gain on derivative liability of $138,269. |
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The Company received its second payment from JMJ towards the loan of $25,000 on August 14, 2013. The Company recorded a debt discount in the amount of $27,500 (payment plus 10% original discount) in connection with the initial valuation of the beneficial conversion feature of the note to be amortized utilizing the effective interest method of accretion over the term of the note. Further, the Company recognized a derivative liability of $62,569 based on the Black Scholes Merton pricing model using the following attributes: .12% risk free rate, 144% volatility and a one year term to maturity. During the nine months ended May 31, 2014 the principal of $27,500 and $3,611 of accrued interest was converted into 7,000,000 shares of common stock. As a result of the conversion the remaining $6,932 of debt discount was expensed to interest expense and the Company recognized a gain on derivative liability of $126,070. |
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On September 16, 2013, the Company executed a convertible promissory note for $10,000 with Robert Hendrickson. The note bears interest at 10% per annum and is due on or before September 15, 2014. The Note is convertible into common stock in whole or in part at a variable conversion price equal to a 49% discount to the VWAP price for the ten trading days prior to conversion. The Company recorded a debt discount in the amount of $10,000 in connection with the initial valuation of the beneficial conversion feature of the note to be amortized utilizing the effective interest method of accretion over the term of the note. Further, the Company recognized an initial derivative liability of $18,300 based on the Black Scholes Merton pricing model. As of February 28, 2014, $4,521 of the debt discount has been amortized to interest expense. In addition, the Company fair valued the derivative at $25,266 resulting in a loss on the change in fair value of the derivative. The note is shown net of a debt discount of $5,479 at February 28, 2014. On March 10, 2014, the original note of $10,000 plus a $1,000 OID was purchased by GCEF Opportunity Fund, LLC. |
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The Company received its third payment from JMJ towards the loan of $25,000 on September 30, 2013. The Company recorded a debt discount in the amount of $27,500 (payment plus 10% original discount) in connection with the initial valuation of the beneficial conversion feature of the note to be amortized utilizing the effective interest method of accretion over the term of the note. Further, the Company recognized a derivative liability of $70,390 based on the Black Scholes Merton pricing model using the following attributes: .10% risk free rate, 261% volatility and a one year term to maturity. As of May 31, 2014; $18,384 of the debt discount has been amortized to interest expense. In addition, the Company fair valued the derivative at $33,714 resulting in a gain on the change in fair value of the derivative. The note is shown net of a debt discount of $9,116 at May 31, 2014 and has accrued interest of $3,611. |
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On January 22, 2014, we obtained short term financing from Finiks Capital, LLC under a Promissory Note in the amount of $100,000 (the “Note”). The Note features an original issue discount of ten percent (10%) and has a face amount of $100,000. We will initially receive $20,000 from the Lender and will receive additional funds at the Lender’s sole discretion. The Note accrues no interest if the principal sum due is repaid within ninety days. The Note incurs interest one time at a rate of ten percent (10%) on the principal sum due, with all principal and interest due in full on the maturity date of one hundred eighty days from the date of issue. At any time, the Note may be converted, in whole or in part at the option of the holder, at a price per share of fifty-one percent (51%) of the average of the three lowest bid side prices in the ten trading days previous to the conversion. The Company recorded a debt discount in the amount of $22,000 (payment plus 10% original discount) in connection with the initial valuation of the beneficial conversion feature of the note to be amortized utilizing the effective interest method of accretion over the term of the note. Further, the Company recognized a derivative liability of $34,965 based on the Black Scholes Merton pricing model using the following attributes: .13% risk free rate, 134% volatility and a six month term to maturity. As of May 31, 2014, $15,889 of the debt discount has been amortized to interest expense. In addition, the Company fair valued the derivative at $40,583 resulting in a gain on the change in fair value of the derivative. The note is shown net of a debt discount of $6,111 at May 31, 2014. Subsequent to May 31, 2014, the full amount of the note and accrued interest was converted to common stock. |
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On February 4, 2014, we obtained short term financing from GCEF Opportunity Fund, LLC under a Promissory Note in the amount of $33,000. The Note features an original issue discount of ten percent (10%) and we will therefore receive $30,000 in actual funding. The Note is due within forty-five days, with an additional fifteen day grace period. As an additional loan fee, we have agreed to issue the Lender 2,000,000 shares of our common stock. These shares were valued at $0.0188, the closing market price on the day of issuance for total non-cash expense of $37,600. If the Note is not repaid by the maturity date, it shall be converted into 3,465,000 shares of our common stock, representing conversion of the principal, the original issue discount, and an interest at the rate of fifteen percent (15%) into common stock at a price of $0.01 per share. On March 31, 2014, $15,000 was repaid on the note. Subsequent to May 31, 2014, the remaining principal and interest on the note was converted to common stock. |
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On February 26, 2014, The Company received an additional $20,000 from Finiks Capital. The Company recorded a debt discount in the amount of $22,000 (payment plus 10% original discount) in connection with the initial valuation of the beneficial conversion feature of the note to be amortized utilizing the effective interest method of accretion over the term of the note. Further, the Company recognized a derivative liability of $47,295 based on the Black Scholes Merton pricing model using the following attributes: .08% risk free rate, 212% volatility and a six month term to maturity. As of May 31, 2014, $11,489 of the debt discount has been amortized to interest expense. In addition, the Company fair valued the derivative at $33,247 resulting in a gain on the change in fair value of the derivative. The note is shown net of a debt discount of $10,511 at May 31, 2014. Subsequent to May 31, 2014, the full amount of the note and accrued interest was converted to common stock. |
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On March 7, 2014, the Company executed a convertible promissory note for $73,000 with Asher Enterprises, Inc. The note bears interest at 8% per annum and is due on or before December 3, 2014. The note is convertible at a 49% discount any time during the period beginning 180 days following the date of the note. Accrued interest on the note as of May 31, 2014 is $1,376. |
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On March 19, 2014, the Company executed a convertible promissory note for $53,000 with KBM Worldwide, Inc . The note bears interest at 8% per annum and is due on or before December 26, 2014. The note is convertible at a 49% discount any time during the period beginning 180 days following the date of the note. Accrued interest on the note as of May 31, 2014 is $802. |
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On May 20, 2014, the Company executed a convertible promissory note for $53,000 with KBM Worldwide, Inc. The note bears interest at 8% per annum and is due on or before December 26, 2014. The note is convertible at a 49% discount any time during the period beginning 180 days following the date of the note. Accrued interest on the note as of May 31, 2014 is $360. |
The Company received its fourth payment from JMJ towards the loan of $40,000 on April 17, 2014. The Company recorded a debt discount in the amount of $44,000 (payment plus 10% original discount) in connection with the initial valuation of the beneficial conversion feature of the note to be amortized utilizing the effective interest method of accretion over the term of the note. Further, the Company recognized a derivative liability of $104,127 based on the Black Scholes Merton pricing model using the following attributes: .11% risk free rate, 214% volatility and a one year term to maturity. As of May 31, 2014; $5,304 of the debt discount has been amortized to interest expense. In addition, the Company fair valued the derivative at $66,695 resulting in a gain on the change in fair value of the derivative. The note is shown net of a debt discount of $38,696 at May 31, 2014. |
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On March 5, 2014, the Company executed a Convertible Promissory Note (the “note”) with Black Mountain Equities, Inc. (“Black Mountain”). The nominal principal sum of the Note is $250,000, with an original issue discount of ten percent (10%). The note matures one year from the effective date of each payment, which is made at the sole discretion of Black Mountain. The Note is convertible into common stock in whole or in part at a variable conversion price equal to the lessor of $0.025 or a 60% discount to the lowest trade price in the twenty five trading days prior to conversion. The Company received its first payment towards the loan of $25,000. The Company recorded a debt discount in the amount of $27,500 (payment plus 10% original discount) in connection with the initial valuation of the beneficial conversion feature of the note to be amortized utilizing the effective interest method of accretion over the term of the note. Further, the Company recognized a derivative liability of $110,515 based on the Black Scholes Merton pricing model using the following attributes: .13% risk free rate, 193% volatility and a one year term to maturity. As of May 31, 2014; $6,555 of the debt discount has been amortized to interest expense. In addition, the Company fair valued the derivative at $36,409 resulting in a gain on the change in fair value of the derivative. The note is shown net of a debt discount of $20,945 at May 31, 2014. |
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A summary of the status of the Company’s debt discounts, derivative liabilities and original issue discounts, and changes during the periods is presented below: |
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Debt Discount | | 31-Aug-13 | | Additions | | Amortization | | 31-May-14 |
Asher – 3/20/13 | | $ | — | | | $ | 32,500 | | | | (32,500 | ) | | $ | — | |
Asher – 4/4/13 | | | — | | | | 15,500 | | | | (15,500 | ) | | | — | |
Asher – 6/3/13 | | | — | | | | 32,500 | | | | (32,500 | ) | | | — | |
Asher – 8/5/13 | | | — | | | | 32,500 | | | | (32,500 | ) | | | — | |
Black Mountain – 3/5/14 | | | — | | | | 27,500 | | | | (6,555 | ) | | | 20,945 | |
Caspi | | | 19,480 | | | | 48,539 | | | | (42,769 | ) | | | 25,250 | |
Finiks – 1/21/14 | | | — | | | | 22,000 | | | | (15,888 | ) | | | 6,112 | |
Finiks – 2/26/14 | | | — | | | | 22,000 | | | | (11,488 | ) | | | 10,512 | |
GCEF Opportunity | | | — | | | | 11,769 | | | | (11,769 | ) | | | — | |
Hendrickson – 9/16/13 | | | — | | | | 10,000 | | | | (10,000 | ) | | | — | |
JMJ – 6/19/13 | | | 48,234 | | | | — | | | | (48,234 | ) | | | — | |
JMJ – 8/14/13 | | | 26,144 | | | | — | | | | (20,644 | ) | | | 5,500 | |
JMJ – 9/30/13 | | | — | | | | 27,500 | | | | (18,384 | ) | | | 9,116 | |
JMJ – 4/17/14 | | | — | | | | 44,000 | | | | (5,304 | ) | | | 38,696 | |
| | $ | 93,858 | | | $ | 326,308 | | | $ | (304,035 | ) | | $ | 116,131 | |
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Derivative Liabilities | | 31-Aug-13 | | Initial Valuation | | Revaluation on 5/31/14 | | Change in fair value of Derivative |
Asher – 3/20/13 | | $ | — | | | $ | 49,939 | | | $ | — | | | $ | (49,939 | ) |
Asher – 4/4/13 | | | — | | | | 21,610 | | | | — | | | | (21,610 | ) |
Asher – 6/3/13 | | | — | | | | 34,945 | | | | — | | | | (34,945 | ) |
Asher – 8/5/13 | | | — | | | | 155,554 | | | | — | | | | (155,554 | ) |
Black Mountain – 3/5/14 | | | — | | | | 110,515 | | | | 36,409 | | | | (74,106 | ) |
Finiks – 1/21/14 | | | — | | | | 34,965 | | | | 40,583 | | | | 5,618 | |
Finiks – 2/26/14 | | | — | | | | 47,295 | | | | 33,247 | | | | (14,048 | ) |
Hendrickson – 9/16/13 | | | — | | | | 18,300 | | | | — | | | | (18,300 | ) |
JMJ – 6/19/13 | | | 102,245 | | | | — | | | | — | | | | (102,245 | ) |
JMJ – 8/14/13 | | | 46,625 | | | | — | | | | 11,119 | | | | (35,506 | ) |
JMJ – 9/30/13 | | | — | | | | 70,390 | | | | 33,714 | | | | (36,676 | ) |
JMJ - 4/17/14 | | | — | | | | 104,127 | | | | 66,695 | | | | (37,432 | ) |
| | $ | 148,870 | | | $ | 647,640 | | | $ | 221,767 | | | $ | 574,743 | |
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Original Issue Discount | | 31-Aug-13 | | Additions | | Amortization | | 31-May-14 |
Black Mountain – 3/5/14 | | | $ | | | $ | 2,500 | | | $ | (465 | ) | | $ | 2,035 | |
Finiks – 1/21/14 | | | — | | | | 2,000 | | | | (1,444 | ) | | | 556 | |
Finiks – 2/26/14 | | | — | | | | 2,000 | | | | (1,044 | ) | | | 956 | |
GCEF Opportunity | | | — | | | | 3,000 | | | | (3,000 | ) | | | — | |
JMJ – 6/19/13 | | | 4,385 | | | | — | | | | (4,159 | ) | | | 226 | |
JMJ – 8/14/13 | | | 2,377 | | | | — | | | | (1,890 | ) | | | 487 | |
JMJ – 9/30/13 | | | — | | | | 2,500 | | | | (1,685 | ) | | | 815 | |
JMJ – 4/17/14 | | | — | | | | 4,000 | | | | (493 | ) | | | 3,507 | |
| | $ | 6,762 | | | $ | 16,000 | | | $ | (14,180 | ) | | $ | 8,582 | |